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FIRST DIVISION

[G.R. No. 143993. August 18, 2004.]

MCDONALD'S CORPORATION and MCGEORGE FOOD


INDUSTRIES, INC., petitioners, vs. L.C. BIG MAK BURGER,
INC., FRANCIS B. DY, EDNA A. DY, RENE B. DY, WILLIAM
B. DY, JESUS AYCARDO, ARACELI AYCARDO, and GRACE
HUERTO, respondents.

Abello Concepcion Regala & Cruz for petitioners.


Vicente M. Joyas for respondents.

SYNOPSIS

Petitioners assail the decision of the Court of Appeals, which reversed the
decision of the trial court, thus finding the respondent L.C. Mak Burger, Inc. not
liable for trademark infringement and unfair competition. The Court of Appeals
found that there is no likelihood of confusion that could arise in the use of
respondents' "Big Mak" mark on hamburgers. In its petition filed before this Court,
petitioners contend that the respondents' use, without petitioners' consent of a
colorable imitation of the "Big Mac" mark in advertising and selling respondents'
hamburger sandwiches would likely cause confusion in the mind of the purchasing
public on the source of the hamburgers or the identity of the business. Petitioners
further claim that the respondents are guilty of unfair competition for fraudulently
passing off their hamburgers as "Big Mac" hamburgers.

The Supreme Court found the respondents liable for trademark


infringement. According to the Court, the respondents' use of the "Big Mak" mark
results in likelihood of confusion. Respondents' inability to explain sufficiently
how and why they came to choose "Big Mak" for their hamburger sandwiches
indicates their intent to imitate petitioners' "Big Mac" mark. Absent proof that
respondents' adoption of the "Big Mak" mark was due to honest mistake or was
fortuitous, the inescapable conclusion is that respondents adopted the "Big Mak"
mark to "ride on the coattails" of the more established "Big Mac" mark. Anent the
charge of unfair competition, the Court found the respondents liable therefor.
According to the Court, passing off or palming off takes place where the defendant
by imitative devices on the general appearance of the goods, misleads prospective
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purchasers into buying his merchandise under the impression that they are buying
that of his competitors.

SYLLABUS

1. REMEDIAL LAW; CIVIL PROCEDURE; APPEALS; PETITION


FOR REVIEW; ONLY QUESTIONS OF LAW MAY BE RAISED THEREIN.
A party intending to appeal from a judgment of the Court of Appeals may file with
this Court a petition for review under Section 1 of Rule 45 ("Section 1") raising
only questions of law. A question of law exists when the doubt or difference arises
on what the law is on a certain state of facts. There is a question of fact when the
doubt or difference arises on the truth or falsity of the alleged facts. Here,
petitioners raise questions of fact and law in assailing the Court of Appeals'
findings on respondent corporation's non-liability for trademark infringement and
unfair competition. Ordinarily, the Court can deny due course to such a petition. In
view, however, of the contradictory findings of fact of the RTC and Court of
Appeals, the Court opts to accept the petition, this being one of the recognized
exceptions to Section 1. We took a similar course of action in Asia Brewery, Inc. v.
Court of Appeals which also involved a suit for trademark infringement and unfair
competition in which the trial court and the Court of Appeals arrived at conflicting
findings.

2. COMMERCIAL LAW; TRADEMARK LAW; TRADEMARK


INFRINGEMENT; ELEMENTS. To establish trademark infringement, the
following elements must be shown: (1) the validity of plaintiff's mark; (2) the
plaintiff's ownership of the mark; and (3) the use of the mark or its colorable
imitation by the alleged infringer results in "likelihood of confusion". Of these, it
is the element of likelihood of confusion that is the gravamen of trademark
infringement.

3. ID.; ID.; ID.; ID.; MARK WHEN VALID; GENERIC MARKS


DISTINGUISHED FROM DESCRIPTIVE MARKS; "BIG MAC" MARK FALLS
UNDER THE CLASS OF FANCIFUL OR ARBITRARY MARKS AS IT BEARS
NO LOGICAL RELATION TO THE ACTUAL CHARACTERISTICS OF THE
PRODUCT IT REPRESENTS. A mark is valid if it is "distinctive" and thus not
barred from registration under Section 4 of RA 166 ("Section 4"). However, once
registered, not only the mark's validity but also the registrant's ownership of the
mark is prima facie presumed. Respondents contend that of the two words in the
"Big Mac" mark, it is only the word "Mac" that is valid because the word "Big" is
generic and descriptive (proscribed under Section 4[e]), and thus "incapable of
exclusive appropriation". The contention has no merit. The "Big Mac" mark,
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which should be treated in its entirety and not dissected word for word, is neither
generic nor descriptive. Generic marks are commonly used as the name or
description of a kind of goods, such as "Lite" for beer or "Chocolate Fudge" for
chocolate soda drink. Descriptive marks, on the other hand, convey the
characteristics, functions, qualities or ingredients of a product to one who has
never seen it or does not know it exists, such as "Arthriticare" for arthritis
medication. On the contrary, "Big Mac" falls under the class of fanciful or
arbitrary marks as it bears no logical relation to the actual characteristics of the
product it represents. As such, it is highly distinctive and thus valid. Significantly,
the trademark "Little Debbie" for snack cakes was found arbitrary or fanciful. CSHcDT

4. ID.; ID.; ID.; REGISTRATION IN SUPPLEMENTAL REGISTER


NOT PRIMA FACIE EVIDENCE OF VALIDITY OR REGISTRANT'S
EXCLUSIVE RIGHT TO USE THE MARK ON THE GOODS SPECIFIED IN
THE CERTIFICATE. The Court also finds that petitioners have duly
established McDonald's exclusive ownership of the "Big Mac" mark. Although
Topacio and the Isaiyas Group registered the "Big Mac" mark ahead of
McDonald's, Topacio, as petitioners disclosed, had already assigned his rights to
McDonald's. The Isaiyas Group, on the other hand, registered its trademark only in
the Supplemental Register. A mark which is not registered in the Principal
Register, and thus not distinctive, has no real protection. Indeed, we have held that
registration in the Supplemental Register is not even a prima facie evidence of the
validity of the registrant's exclusive right to use the mark on the goods specified in
the certificate.

5. ID.; ID.; ID.; CONFUSION; TYPES. Section 22 covers two types


of confusion arising from the use of similar or colorable imitation marks, namely,
confusion of goods (product confusion) and confusion of business (source or
origin confusion). In Sterling Products International, Incorporated v.
Farbenfabriken Bayer Aktiengesellschaft, et al., the Court distinguished these two
types of confusion, thus: [Rudolf] Callman notes two types of confusion. The first
is the confusion of goods "in which event the ordinarily prudent purchaser would
be induced to purchase one product in the belief that he was purchasing the other".
. . . The other is the confusion of business: "Here though the goods of the parties
are different, the defendant's product is such as might reasonably be assumed to
originate with the plaintiff, and the public would then be deceived either into that
belief or into the belief that there is some connection between the plaintiff and
defendant which, in fact, does not exist".

6. ID.; ID.; ID.; CONFUSION OF BUSINESS, WHEN IT EXISTS.


Under Act No. 666, the first trademark law, infringement was limited to confusion
of goods only, when the infringing mark is used on "goods of a similar kind".
Thus, no relief was afforded to the party whose registered mark or its colorable
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imitation is used on different although related goods. To remedy this situation,
Congress enacted RA 166 on 20 June 1947. In defining trademark infringement,
Section 22 of RA 166 deleted the requirement in question and expanded its scope
to include such use of the mark or its colorable imitation that is likely to result in
confusion on "the source or origin of such goods or services, or identity of such
business". Thus, while there is confusion of goods when the products are
competing, confusion of business exists when the products are non-competing but
related enough to produce confusion of affiliation.

7. ID.; ID.; ID.; REGISTERED TRADEMARK OWNER ENJOYS


PROTECTION IN PRODUCT AND MARKET AREAS THAT ARE THE
NORMAL POTENTIAL EXPANSION OF HIS BUSINESS. The registered
trademark owner may use his mark on the same or similar products, in different
segments of the market, and at different price levels depending on variations of the
products for specific segments of the market. The Court has recognized that the
registered trademark owner enjoys protection in product and market areas that are
the normal potential expansion of his business. Thus, the Court has declared:
Modern law recognizes that the protection to which the owner of a trademark is
entitled is not limited to guarding his goods or business from actual market
competition with identical or similar products of the parties, but extends to all
cases in which the use by a junior appropriator of a trade-mark or trade-name is
likely to lead to a confusion of source, as where prospective purchasers would be
misled into thinking that the complaining party has extended his business into the
field (see 148 ALR 56 et seq; 53 Am Jur. 576) or is in any way connected with the
activities of the infringer; or when it forestalls the normal potential expansion of
his business (v. 148 ALR, 77, 84; 52 Am. Jur. 576, 577).

8. ID.; ID.; ID.; DOMINANCY TEST DISTINGUISHED FROM


HOLISTIC TEST. In determining likelihood of confusion, jurisprudence has
developed two tests, the dominancy test and the holistic test. The dominancy test
focuses on the similarity of the prevalent features of the competing trademarks that
might cause confusion. In contrast, the holistic test requires the court to consider
the entirety of the marks as applied to the products, including the labels and
packaging, in determining confusing similarity.

9. ID.; ID.; ID.; DOMINANCY TEST, ELABORATED. This Court,


however, has relied on the dominancy test rather than the holistic test. The
dominancy test considers the dominant features in the competing marks in
determining whether they are confusingly similar. Under the dominancy test,
courts give greater weight to the similarity of the appearance of the product arising
from the adoption of the dominant features of the registered mark, disregarding
minor differences. Courts will consider more the aural and visual impressions
created by the marks in the public mind, giving little weight to factors like prices,
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quality, sales outlets and market segments. Thus, in the 1954 case of Co Tiong Sa
v. Director of Patents, the Court ruled: . . . It has been consistently held that the
question of infringement of a trademark is to be determined by the test of
dominancy. Similarity in size, form and color, while relevant, is not conclusive. If
the competing trademark contains the main or essential or dominant features of
another, and confusion and deception is likely to result, infringement takes place.
Duplication or imitation is not necessary; nor is it necessary that the infringing
label should suggest an effort to imitate. (G. Heilman Brewing Co. vs. Independent
Brewing Co., 191 F., 489, 495, citing Eagle White Lead Co. vs. Pflugh (CC) 180
Fed. 579). The question at issue in cases of infringement of trademarks is whether
the use of the marks involved would be likely to cause confusion or mistakes in the
mind of the public or deceive purchasers. (Auburn Rubber Corporation vs.
Honover Rubber Co., 107 F. 2d 588; . . .) The Court reiterated the dominancy test
in Lim Hoa v. Director of Patents, Phil. Nut Industry, Inc. v. Standard Brands Inc.,
Converse Rubber Corporation v. Universal Rubber Products, Inc., and Asia
Brewery, Inc. v. Court of Appeals. In the 2001 case of Societe Des Produits
Nestl, S.A. v. Court of Appeals, the Court explicitly rejected the holistic test in this
wise: [T]he totality or holistic test is contrary to the elementary postulate of the
law on trademarks and unfair competition that confusing similarity is to be
determined on the basis of visual, aural, connotative comparisons and overall
impressions engendered by the marks in controversy as they are encountered in the
realities of the marketplace. The test of dominancy is now explicitly incorporated
into law in Section 155.1 of the Intellectual Property Code which defines
infringement as the "colorable imitation of a registered mark . . . or a dominant
feature thereof". cAaETS

10. ID.; ID.; ID.; ID.; APPLICATION IN CASE AT BAR. Applying


the dominancy test, the Court finds that respondents' use of the "Big Mak" mark
results in likelihood of confusion. First, "Big Mak" sounds exactly the same as
"Big Mac". Second, the first word in "Big Mak" is exactly the same as the first
word in "Big Mac". Third, the first two letters in "Mak" are the same as the first
two letters in "Mac". Fourth, the last letter in "Mak" while a "k" sounds the same
as "c" when the word "Mak" is pronounced. Fifth, in Filipino, the letter "k"
replaces "c" in spelling, thus "Caloocan" is spelled "Kalookan". In short, aurally
the two marks are the same, with the first word of both marks phonetically the
same, and the second word of both marks also phonetically the same. Visually, the
two marks have both two words and six letters, with the first word of both marks
having the same letters and the second word having the same first two letters. In
spelling, considering the Filipino language, even the last letters of both marks are
the same. Clearly, respondents have adopted in "Big Mak" not only the dominant
but also almost all the features of "Big Mac". Applied to the same food product of
hamburgers, the two marks will likely result in confusion in the public mind. The
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Court has taken into account the aural effects of the words and letters contained in
the marks in determining the issue of confusing similarity. Certainly, "Big Mac"
and "Big Mak" for hamburgers create even greater confusion, not only aurally but
also visually.

11. ID.; ID.; ID.; ABSENT PROOF THAT THE RESPONDENT'S


ADOPTION OF THE "BIG MAK" MARK WAS DUE TO HONEST MISTAKE
OR WAS FORTUITOUS, THE INESCAPABLE CONCLUSION IS THAT THE
RESPONDENTS ADOPTED IT TO RIDE ON THE COATTAILS OF THE
MORE ESTABLISHED "BIG MAC" MARK. Indeed, a person cannot
distinguish "Big Mac" from "Big Mak" by their sound. When one hears a "Big
Mac" or "Big Mak" hamburger advertisement over the radio, one would not know
whether the "Mac" or "Mak" ends with a "c" or a "k". Petitioners' aggressive
promotion of the "Big Mac" mark, as borne by their advertisement expenses, has
built goodwill and reputation for such mark making it one of the easily
recognizable marks in the market today. This increases the likelihood that
consumers will mistakenly associate petitioners' hamburgers and business with
those of respondents'. Respondents' inability to explain sufficiently how and why
they came to choose "Big Mak" for their hamburger sandwiches indicates their
intent to imitate petitioners' "Big Mac" mark. Contrary to the Court of Appeals'
finding, respondents' claim that their "Big Mak" mark was inspired by the first
names of respondent Dy's mother (Maxima) and father (Kimsoy) is not credible.
Absent proof that respondents' adoption of the "Big Mak" mark was due to honest
mistake or was fortuitous, the inescapable conclusion is that respondents adopted
the "Big Mak" mark to "ride on the coattails" of the more established "Big Mac"
mark. This saves respondents much of the expense in advertising to create market
recognition of their mark and hamburgers. Thus, we hold that confusion is likely to
result in the public mind. We sustain petitioners' claim of trademark infringement.

12. ID.; ID.; ID.; NOT NEGATED BY FAILURE TO PRESENT PROOF


OF FACTUAL CONFUSION. Petitioners' failure to present proof of actual
confusion does not negate their claim of trademark infringement. As noted in
American Wire & Cable Co. v. Director of Patents, Section 22 requires the less
stringent standard of "likelihood of confusion" only. While proof of actual
confusion is the best evidence of infringement, its absence is inconsequential.

13. ID.; ID.; ID.; UNFAIR COMPETITION; ELEMENTS. The


essential elements of an action for unfair competition are (1) confusing similarity
in the general appearance of the goods, and (2) intent to deceive the public and
defraud a competitor. The confusing similarity may or may not result from
similarity in the marks, but may result from other external factors in the packaging
or presentation of the goods. The intent to deceive and defraud may be inferred
from the similarity of the appearance of the goods as offered for sale to the public.
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Actual fraudulent intent need not be shown.

14. ID.; ID.; ID.; A FORM OF UNFAIR COMPETITION;


TRADEMARK INFRINGEMENT; WHEN IT TAKES PLACE WITHOUT
UNFAIR COMPETITION. Unfair competition is broader than trademark
infringement and includes passing off goods with or without trademark
infringement. Trademark infringement is a form of unfair competition. Trademark
infringement constitutes unfair competition when there is not merely likelihood of
confusion, but also actual or probable deception on the public because of the
general appearance of the goods. There can be trademark infringement without
unfair competition as when the infringer discloses on the labels containing the
mark that he manufactures the goods, thus preventing the public from being
deceived that the goods originate from the trademark owner.

15. ID.; ID.; ID.; UNFAIR COMPETITION; PASSING OFF OR


PALMING OFF; WHEN IT TAKES PLACE. Passing off (or palming off)
takes place where the defendant, by imitative devices on the general appearance of
the goods, misleads prospective purchasers into buying his merchandise under the
impression that they are buying that of his competitors. Thus, the defendant gives
his goods the general appearance of the goods of his competitor with the intention
of deceiving the public that the goods are those of his competitor. The
dissimilarities in the packaging are minor compared to the stark similarities in the
words that give respondents' "Big Mak" hamburgers the general appearance of
petitioners' "Big Mac" hamburgers. Section 29 (a) expressly provides that the
similarity in the general appearance of the goods may be in the "devices or words"
used on the wrappings. Respondents have applied on their plastic wrappers and
bags almost the same words that petitioners use on their styrofoam box. What
attracts the attention of the buying public are the words "Big Mak" which are
almost the same, aurally and visually, as the words "Big Mac". The dissimilarities
in the material and other devices are insignificant compared to the glaring
similarity in the words used in the wrappings. IcDHaT

16. ID.; ID.; ID.; ID.; COMMITTED WHERE THE DEFENDANT


GIVES HIS GOODS THE GENERAL APPEARANCE OF GOODS OF
ANOTHER MANUFACTURER; RESPONDENT IS LIABLE FOR UNFAIR
COMPETITION IN CASE AT BAR. Section 29 (a) also provides that the
defendant gives "his goods the general appearance of goods of another
manufacturer". Respondents' goods are hamburgers which are also the goods of
petitioners. If respondents sold egg sandwiches only instead of hamburger
sandwiches, their use of the "Big Mak" mark would not give their goods the
general appearance of petitioners' "Big Mac" hamburgers. In such case, there is
only trademark infringement but no unfair competition. However, since
respondents chose to apply the "Big Mak" mark on hamburgers, just like
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petitioner's use of the "Big Mac" mark on hamburgers, respondents have obviously
clothed their goods with the general appearance of petitioners' goods. Moreover,
there is no notice to the public that the "Big Mak" hamburgers are products of
"L.C. Big Mak Burger, Inc." Respondents introduced during the trial plastic
wrappers and bags with the words "L.C. Big Mak Burger, Inc." to inform the
public of the name of the seller of the hamburgers. However, petitioners
introduced during the injunctive hearings plastic wrappers and bags with the "Big
Mak" mark without the name "L.C. Big Mak Burger, Inc." Respondents' belated
presentation of plastic wrappers and bags bearing the name of "L.C. Big Mak
Burger, Inc." as the seller of the hamburgers is an after-thought designed to
exculpate them from their unfair business conduct. As earlier stated, we cannot
consider respondents' evidence since petitioners' complaint was based on facts
existing before and during the injunctive hearings. Thus, there is actually no notice
to the public that the "Big Mak" hamburgers are products of "L.C. Big Mak
Burger, Inc." and not those of petitioners who have the exclusive right to the "Big
Mac" mark. This clearly shows respondents' intent to deceive the public. Had
respondents' placed a notice on their plastic wrappers and bags that the hamburgers
are sold by "L.C. Big Mak Burger, Inc.", then they could validly claim that they
did not intend to deceive the public. In such case, there is only trademark
infringement but no unfair competition. Respondents, however, did not give such
notice. We hold that as found by the RTC, respondent corporation is liable for
unfair competition.

17. ID.; ID.; ID.; AWARD OR DAMAGES AND ISSUANCE OF


INJUNCTIVE WRIT FOR INFRINGEMENT; PROPER IN CASE AT BAR.
Under Section 23 ("Section 23") in relation to Section 29 of RA 166, a plaintiff
who successfully maintains trademark infringement and unfair competition claims
is entitled to injunctive and monetary reliefs. Here, the RTC did not err in issuing
the injunctive writ of 16 August 1990 (made permanent in its Decision of 5
September 1994) and in ordering the payment of P400,000 actual damages in favor
of petitioners. The injunctive writ is indispensable to prevent further acts of
infringement by respondent corporation. Also, the amount of actual damages is a
reasonable percentage (11.9%) of respondent corporation's gross sales for three
(19881989 and 1991) of the six years (19841990) respondents have used the
"Big Mak" mark. The RTC also did not err in awarding exemplary damages by
way of correction for the public good in view of the finding of unfair competition
where intent to deceive the public is essential. The award of attorney's fees and
expenses of litigation is also in order.

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DECISION

CARPIO, J : p

The Case

This is a petition for review 1(1) of the Decision dated 26 November 1999
of the Court of Appeals 2(2) finding respondent L.C. Big Mak Burger, Inc. not
liable for trademark infringement and unfair competition and ordering petitioners
to pay respondents P1,900,000 in damages, and of its Resolution dated 11 July
2000 denying reconsideration. The Court of Appeals Decision reversed the 5
September 1994 Decision 3(3) of the Regional Trial Court of Makati, Branch 137,
finding respondent L.C. Big Mak Burger, Inc. liable for trademark infringement
and unfair competition.

The Facts

Petitioner McDonalds Corporation (McDonalds) is a corporation


organized under the laws of Delaware, United States. McDonalds operates, by
itself or through its franchisees, a global chain of fast-food restaurants.
McDonalds 4(4) owns a family of marks 5(5) including the Big Mac mark for
its double-decker hamburger sandwich. 6(6) McDonalds registered this
trademark with the United States Trademark Registry on 16 October 1979. 7(7)
Based on this Home Registration, McDonalds applied for the registration of the
same mark in the Principal Register of the then Philippine Bureau of Patents,
Trademarks and Technology (PBPTT), now the Intellectual Property Office
(IPO). Pending approval of its application, McDonalds introduced its Big
Mac hamburger sandwiches in the Philippine market in September 1981. On 18
July 1985, the PBPTT allowed registration of the Big Mac mark in the Principal
Register based on its Home Registration in the United States.

Like its other marks, McDonalds displays the Big Mac mark in items
8(8) and paraphernalia 9(9) in its restaurants, and in its outdoor and indoor
signages. From 1982 to 1990, McDonalds spent P10.5 million in advertisement
for Big Mac hamburger sandwiches alone. 10(10)

Petitioner McGeorge Food Industries (petitioner McGeorge), a domestic


corporation, is McDonalds Philippine franchisee. 11(11)

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Respondent L.C. Big Mak Burger, Inc. (respondent corporation) is a
domestic corporation which operates fast-food outlets and snack vans in Metro
Manila and nearby provinces. 12(12) Respondent corporations menu includes
hamburger sandwiches and other food items. 13(13) Respondents Francis B. Dy,
Edna A. Dy, Rene B. Dy, William B. Dy, Jesus Aycardo, Araceli Aycardo, and
Grace Huerto (private respondents) are the incorporators, stockholders and
directors of respondent corporation. 14(14)

On 21 October 1988, respondent corporation applied with the PBPTT for


the registration of the Big Mak mark for its hamburger sandwiches. McDonalds
opposed respondent corporations application on the ground that Big Mak was a
colorable imitation of its registered Big Mac mark for the same food products.
McDonalds also informed respondent Francis Dy (respondent Dy), the
chairman of the Board of Directors of respondent corporation, of its exclusive right
to the Big Mac mark and requested him to desist from using the Big Mac mark
or any similar mark. ADaSET

Having received no reply from respondent Dy, petitioners on 6 June 1990


sued respondents in the Regional Trial Court of Makati, Branch 137 (RTC), for
trademark infringement and unfair competition. In its Order of 11 July 1990, the
RTC issued a temporary restraining order (TRO) against respondents enjoining
them from using the Big Mak mark in the operation of their business in the
National Capital Region. 15(15) On 16 August 1990, the RTC issued a writ of
preliminary injunction replacing the TRO. 16(16)

In their Answer, respondents admitted that they have been using the name
Big Mak Burger for their fast-food business. Respondents claimed, however,
that McDonalds does not have an exclusive right to the Big Mac mark or to any
other similar mark. Respondents point out that the Isaiyas Group of Corporations
(Isaiyas Group) registered the same mark for hamburger sandwiches with the
PBPTT on 31 March 1979. One Rodolfo Topacio (Topacio) similarly registered
the same mark on 24 June 1983, prior to McDonalds registration on 18 July 1985.
Alternatively, respondents claimed that they are not liable for trademark
infringement or for unfair competition, as the Big Mak mark they sought to
register does not constitute a colorable imitation of the Big Mac mark.
Respondents asserted that they did not fraudulently pass off their hamburger
sandwiches as those of petitioners Big Mac hamburgers. 17(17) Respondents
sought damages in their counterclaim.

In their Reply, petitioners denied respondents claim that McDonalds is not


the exclusive owner of the Big Mac mark. Petitioners asserted that while the
Isaiyas Group and Topacio did register the Big Mac mark ahead of McDonalds,
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the Isaiyas Group did so only in the Supplemental Register of the PBPTT and such
registration does not provide any protection. McDonalds disclosed that it had
acquired Topacios rights to his registration in a Deed of Assignment dated 18
May 1981. 18(18)

The Trial Courts Ruling

On 5 September 1994, the RTC rendered judgment (RTC Decision)


finding respondent corporation liable for trademark infringement and unfair
competition. However, the RTC dismissed the complaint against private
respondents and the counterclaim against petitioners for lack of merit and
insufficiency of evidence. The RTC held:

Undeniably, the mark B[ig] M[ac] is a registered trademark for


plaintiff McDonalds, and as such, it is entitled [to] protection against
infringement.

xxx xxx xxx

There exist some distinctions between the names B[ig] M[ac] and
B[ig] M[ak] as appearing in the respective signages, wrappers and
containers of the food products of the parties. But infringement goes beyond
the physical features of the questioned name and the original name. There
are still other factors to be considered.

xxx xxx xxx

Significantly, the contending parties are both in the business of


fast-food chains and restaurants. An average person who is hungry and wants
to eat a hamburger sandwich may not be discriminating enough to look for a
McDonalds restaurant and buy a B[ig] M[ac] hamburger. Once he sees a
stall selling hamburger sandwich, in all likelihood, he will dip into his
pocket and order a B[ig] M[ak] hamburger sandwich. Plaintiff
McDonalds fast-food chain has attained wide popularity and acceptance by
the consuming public so much so that its air-conditioned food outlets and
restaurants will perhaps not be mistaken by many to be the same as
defendant corporations mobile snack vans located along busy streets or
highways. But the thing is that what is being sold by both contending parties
is a food item a hamburger sandwich which is for immediate
consumption, so that a buyer may easily be confused or deceived into
thinking that the B[ig] M[ak] hamburger sandwich he bought is a
food-product of plaintiff McDonalds, or a subsidiary or allied outlet thereof.
Surely, defendant corporation has its own secret ingredients to make its
hamburger sandwiches as palatable and as tasty as the other brands in the
market, considering the keen competition among mushrooming hamburger
stands and multinational fast-food chains and restaurants. Hence, the
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trademark B[ig] M[ac] has been infringed by defendant corporation when
it used the name B[ig] M[ak] in its signages, wrappers, and containers in
connection with its food business . . .

Did the same acts of defendants in using the name B[ig] M[ak] as a
trademark or tradename in their signages, or in causing the name B[ig]
M[ak] to be printed on the wrappers and containers of their food products
also constitute an act of unfair competition under Section 29 of the
Trademark Law?

The answer is in the affirmative . . .

The . . . provision of the law concerning unfair competition is


broader and more inclusive than the law concerning the infringement of
trademark, which is of more limited range, but within its narrower range
recognizes a more exclusive right derived by the adoption and registration of
the trademark by the person whose goods or services are first associated
therewith. . . . Notwithstanding the distinction between an action for
trademark infringement and an action for unfair competition, however, the
law extends substantially the same relief to the injured party for both cases.
(See Sections 23 and 29 of Republic Act No. 166)

Any conduct may be said to constitute unfair competition if the effect


is to pass off on the public the goods of one man as the goods of another.
The choice of B[ig] M[ak] as tradename by defendant corporation is not
merely for sentimental reasons but was clearly made to take advantage of the
reputation, popularity and the established goodwill of plaintiff McDonalds.
For, as stated in Section 29, a person is guilty of unfair competition who in
selling his goods shall give them the general appearance, of goods of another
manufacturer or dealer, either as to the goods themselves or in the wrapping
of the packages in which they are contained, or the devices or words thereon,
or in any other feature of their appearance, which would likely influence
purchasers to believe that the goods offered are those of a manufacturer or
dealer other than the actual manufacturer or dealer. Thus, plaintiffs have
established their valid cause of action against the defendants for trademark
infringement and unfair competition and for damages. 19(19)

The dispositive portion of the RTC Decision provides:

WHEREFORE, judgment is rendered in favor of plaintiffs


McDonalds Corporation and McGeorge Food Industries, Inc. and against
defendant L.C. Big Mak Burger, Inc., as follows:

1. The writ of preliminary injunction issued in this case on [16


August 1990] is made permanent;

2. Defendant L.C. Big Mak Burger, Inc. is ordered to pay


Copyright 1994-2016 CD Technologies Asia, Inc. Jurisprudence 1901 to 2016 Third Release 12
plaintiffs actual damages in the amount of P400,000.00, exemplary damages
in the amount of P100,000.00, and attorneys fees and expenses of litigation
in the amount of P100,000.00;

3. The complaint against defendants Francis B. Dy, Edna A. Dy,


Rene B. Dy, William B. Dy, Jesus Aycardo, Araceli Aycardo and Grace
Huerto, as well as all counter-claims, are dismissed for lack of merit as well
as for insufficiency of evidence. 20(20)

Respondents appealed to the Court of Appeals.

The Ruling of the Court of Appeals

On 26 November 1999, the Court of Appeals rendered judgment (Court of


Appeals Decision) reversing the RTC Decision and ordering McDonalds to pay
respondents P1,600,000 as actual and compensatory damages and P300,000 as
moral damages. The Court of Appeals held:

Plaintiffs-appellees in the instant case would like to impress on this


Court that the use of defendants-appellants of its corporate name the whole
L.C. B[ig] M[ak] B[urger], I[nc]. which appears on their food packages,
signages and advertisements is an infringement of their trademark B[ig]
M[ac] which they use to identify [their] double decker sandwich, sold in a
Styrofoam box packaging material with the McDonalds logo of umbrella
M stamped thereon, together with the printed mark in red bl[o]ck capital
letters, the words being separated by a single space. Specifically,
plaintiffs-appellees argue that defendants-appellants use of their corporate
name is a colorable imitation of their trademark Big Mac. DHACES

xxx xxx xxx

To Our mind, however, this Court is fully convinced that no


colorable imitation exists. As the definition dictates, it is not sufficient that a
similarity exists in both names, but that more importantly, the over-all
presentation, or in their essential, substantive and distinctive parts is such as
would likely MISLEAD or CONFUSE persons in the ordinary course of
purchasing the genuine article. A careful comparison of the way the
trademark B[ig] M[ac] is being used by plaintiffs-appellees and corporate
name L.C. Big Mak Burger, Inc. by defendants-appellants, would readily
reveal that no confusion could take place, or that the ordinary purchasers
would be misled by it. As pointed out by defendants-appellants, the
plaintiffs-appellees trademark is used to designate only one product, a
double decker sandwich sold in a Styrofoam box with the McDonald's
logo. On the other hand, what the defendants-appellants corporation is using
is not a trademark for its food product but a business or corporate name.
They use the business name L.C. Big Mak Burger, Inc. in their restaurant
Copyright 1994-2016 CD Technologies Asia, Inc. Jurisprudence 1901 to 2016 Third Release 13
business which serves diversified food items such as siopao, noodles, pizza,
and sandwiches such as hotdog, ham, fish burger and hamburger. Secondly,
defendants-appellants corporate or business name appearing in the food
packages and signages are written in silhouette red-orange letters with the
b and m in upper case letters. Above the words Big Mak are the upper
case letter L.C.. Below the words Big Mak are the words Burger, Inc.
spelled out in upper case letters. Furthermore, said corporate or business
name appearing in such food packages and signages is always accompanied
by the company mascot, a young chubby boy named Maky who wears a red
T-shirt with the upper case m appearing therein and a blue lower garment.
Finally, the defendants-appellants food packages are made of plastic
material.

xxx xxx xxx

. . . [I]t is readily apparent to the naked eye that there appears a vast
difference in the appearance of the product and the manner that the
tradename Big Mak is being used and presented to the public. As earlier
noted, there are glaring dissimilarities between plaintiffs-appellees
trademark and defendants-appellants corporate name. Plaintiffs-appellees
product carrying the trademark B[ig] M[ac] is a double decker sandwich
(depicted in the tray mat containing photographs of the various food
products . . . sold in a Styrofoam box with the McDonalds logo and
trademark in red, bl[o]ck capital letters printed thereon . . . at a price which
is more expensive than the defendants-appellants comparable food
products. In order to buy a Big Mac, a customer needs to visit an
air-conditioned McDonalds restaurant usually located in a nearby
commercial center, advertised and identified by its logo the umbrella
M, and its mascot Ronald McDonald. A typical McDonalds
restaurant boasts of a playground for kids, a second floor to accommodate
additional customers, a drive-thru to allow customers with cars to make
orders without alighting from their vehicles, the interiors of the building are
well-lighted, distinctly decorated and painted with pastel colors . . . . In
buying a B[ig] M[ac], it is necessary to specify it by its trademark. Thus, a
customer needs to look for a McDonalds and enter it first before he can
find a hamburger sandwich which carry the mark Big Mac. On the other
hand, defendants-appellants sell their goods through snack vans . . .

Anent the allegation that defendants-appellants are guilty of unfair


competition, We likewise find the same untenable.

Unfair competition is defined as the employment of deception or


any other means contrary to good faith by which a person shall pass off the
goods manufactured by him or in which he deals, or his business, or service,
for those of another who has already established good will for his similar
good, business or services, or any acts calculated to produce the same result

Copyright 1994-2016 CD Technologies Asia, Inc. Jurisprudence 1901 to 2016 Third Release 14
(Sec. 29, Rep. Act No. 166, as amended).

To constitute unfair competition therefore it must necessarily follow


that there was malice and that the entity concerned was in bad faith.

In the case at bar, We find no sufficient evidence adduced by


plaintiffs-appellees that defendants-appellants deliberately tried to pass off
the goods manufactured by them for those of plaintiffs-appellees. The mere
suspected similarity in the sound of the defendants-appellants corporate
name with the plaintiffs-appellees trademark is not sufficient evidence to
conclude unfair competition. Defendants-appellants explained that the name
M[ak] in their corporate name was derived from both the first names of
the mother and father of defendant Francis Dy, whose names are Maxima
and Kimsoy. With this explanation, it is up to the plaintiffs-appellees to
prove bad faith on the part of defendants-appellants. It is a settled rule that
the law always presumes good faith such that any person who seeks to be
awarded damages due to acts of another has the burden of proving that the
latter acted in bad faith or with ill motive. 21(21)

Petitioners sought reconsideration of the Court of Appeals Decision but the


appellate court denied their motion in its Resolution of 11 July 2000.

Hence, this petition for review.

Petitioners raise the following grounds for their petition:

I. THE COURT OF APPEALS ERRED IN FINDING THAT


RESPONDENTS CORPORATE NAME L.C. BIG MAK
BURGER, INC. IS NOT A COLORABLE IMITATION OF THE
MCDONALDS TRADEMARK BIG MAC, SUCH
COLORABLE IMITATION BEING AN ELEMENT OF
TRADEMARK INFRINGEMENT.

A. Respondents use the words Big Mak as trademark for their


products and not merely as their business or corporate name.

B. As a trademark, respondents Big Mak is undeniably and


unquestionably similar to petitioners Big Mac trademark
based on the dominancy test and the idem sonans test
resulting inexorably in confusion on the part of the
consuming public.

II. THE COURT OF APPEALS ERRED IN REFUSING TO


CONSIDER THE INHERENT SIMILARITY BETWEEN THE
MARK BIG MAK AND THE WORD MARK BIG MAC AS
AN INDICATION OF RESPONDENTS INTENT TO DECEIVE
OR DEFRAUD FOR PURPOSES OF ESTABLISHING UNFAIR
Copyright 1994-2016 CD Technologies Asia, Inc. Jurisprudence 1901 to 2016 Third Release 15
COMPETITION. 22(22)

Petitioners pray that we set aside the Court of Appeals Decision and reinstate the
RTC Decision.

In their Comment to the petition, respondents question the propriety of this


petition as it allegedly raises only questions of fact. On the merits, respondents
contend that the Court of Appeals committed no reversible error in finding them
not liable for trademark infringement and unfair competition and in ordering
petitioners to pay damages.

The Issues

The issues are:

1. Procedurally, whether the questions raised in this petition are proper


for a petition for review under Rule 45. ADEaHT

2. On the merits, (a) whether respondents used the words Big Mak not
only as part of the corporate name L.C. Big Mak Burger, Inc. but also as a
trademark for their hamburger products, and (b) whether respondent corporation is
liable for trademark infringement and unfair competition. 23(23)

The Courts Ruling

The petition has merit.

On Whether the Questions Raised in the Petition are


Proper for a Petition for Review

A party intending to appeal from a judgment of the Court of Appeals may


file with this Court a petition for review under Section 1 of Rule 45 (Section 1)
24(24) raising only questions of law. A question of law exists when the doubt or
difference arises on what the law is on a certain state of facts. There is a question
of fact when the doubt or difference arises on the truth or falsity of the alleged
facts. 25(25)

Here, petitioners raise questions of fact and law in assailing the Court of
Appeals findings on respondent corporations non-liability for trademark
infringement and unfair competition. Ordinarily, the Court can deny due course to
such a petition. In view, however, of the contradictory findings of fact of the RTC
and Court of Appeals, the Court opts to accept the petition, this being one of the
recognized exceptions to Section 1. 26(26) We took a similar course of action in
Asia Brewery, Inc. v. Court of Appeals 27(27) which also involved a suit for
Copyright 1994-2016 CD Technologies Asia, Inc. Jurisprudence 1901 to 2016 Third Release 16
trademark infringement and unfair competition in which the trial court and the
Court of Appeals arrived at conflicting findings.

On the Manner Respondents Used


Big Mak in their Business

Petitioners contend that the Court of Appeals erred in ruling that the
corporate name L.C. Big Mak Burger, Inc. appears in the packaging for
respondents hamburger products and not the words Big Mak only.

The contention has merit.

The evidence presented during the hearings on petitioners motion for the
issuance of a writ of preliminary injunction shows that the plastic wrappings and
plastic bags used by respondents for their hamburger sandwiches bore the words
Big Mak. The other descriptive words burger and 100% pure beef were set
in smaller type, along with the locations of branches. 28(28) Respondents cash
invoices simply refer to their hamburger sandwiches as Big Mak. 29(29) It is
respondents snack vans that carry the words L.C. Big Mak Burger, Inc. 30(30)

It was only during the trial that respondents presented in evidence the
plastic wrappers and bags for their hamburger sandwiches relied on by the Court of
Appeals. 31(31) Respondents plastic wrappers and bags were identical with those
petitioners presented during the hearings for the injunctive writ except that the
letters L.C. and the words Burger, Inc. in respondents evidence were added
above and below the words Big Mak, respectively. Since petitioners complaint
was based on facts existing before and during the hearings on the injunctive writ,
the facts established during those hearings are the proper factual bases for the
disposition of the issues raised in this petition.

On the Issue of Trademark Infringement

Section 22 (Section 22) of Republic Act No. 166, as amended (RA 166),
the law applicable to this case, 32(32) defines trademark infringement as follows:

Infringement, what constitutes. Any person who [1] shall use,


without the consent of the registrant, any reproduction, counterfeit, copy or
colorable imitation of any registered mark or trade-name in connection with
the sale, offering for sale, or advertising of any goods, business or services
on or in connection with which such use is likely to cause confusion or
mistake or to deceive purchasers or others as to the source or origin of such
goods or services, or identity of such business; or [2] reproduce, counterfeit,
copy, or colorably imitate any such mark or trade-name and apply such
reproduction, counterfeit, copy, or colorable imitation to labels, signs, prints,
Copyright 1994-2016 CD Technologies Asia, Inc. Jurisprudence 1901 to 2016 Third Release 17
packages, wrappers, receptacles or advertisements intended to be used upon
or in connection with such goods, business or services, shall be liable to a
civil action by the registrant for any or all of the remedies herein provided.
33(33)

Petitioners base their cause of action under the first part of Section 22, i.e.
respondents allegedly used, without petitioners consent, a colorable imitation of
the Big Mac mark in advertising and selling respondents hamburger
sandwiches. This likely caused confusion in the mind of the purchasing public on
the source of the hamburgers or the identity of the business.

To establish trademark infringement, the following elements must be


shown: (1) the validity of plaintiffs mark; (2) the plaintiffs ownership of the
mark; and (3) the use of the mark or its colorable imitation by the alleged infringer
results in likelihood of confusion. 34(34) Of these, it is the element of likelihood
of confusion that is the gravamen of trademark infringement. 35(35)

On the Validity of the Big Mac Mark


and McDonalds Ownership of such Mark

A mark is valid if it is distinctive and thus not barred from registration


under Section 4 36(36) of RA 166 (Section 4). However, once registered, not
only the marks validity but also the registrants ownership of the mark is prima
facie presumed. 37(37)

Respondents contend that of the two words in the Big Mac mark, it is
only the word Mac that is valid because the word Big is generic and
descriptive (proscribed under Section 4[e]), and thus incapable of exclusive
appropriation. 38(38)

The contention has no merit. The Big Mac mark, which should be treated
in its entirety and not dissected word for word, 39(39) is neither generic nor
descriptive. Generic marks are commonly used as the name or description of a kind
of goods, 40(40) such as Lite for beer 41(41) or Chocolate Fudge for
chocolate soda drink. 42(42) Descriptive marks, on the other hand, convey the
characteristics, functions, qualities or ingredients of a product to one who has
never seen it or does not know it exists, 43(43) such as Arthriticare for arthritis
medication. 44(44) On the contrary, Big Mac falls under the class of fanciful or
arbitrary marks as it bears no logical relation to the actual characteristics of the
product it represents. 45(45) As such, it is highly distinctive and thus valid.
Significantly, the trademark Little Debbie for snack cakes was found arbitrary or
fanciful. 46(46)
Copyright 1994-2016 CD Technologies Asia, Inc. Jurisprudence 1901 to 2016 Third Release 18
The Court also finds that petitioners have duly established McDonalds
exclusive ownership of the Big Mac mark. Although Topacio and the Isaiyas
Group registered the Big Mac mark ahead of McDonalds, Topacio, as
petitioners disclosed, Topacio had already assigned his rights to McDonalds. The
Isaiyas Group, on the other hand, registered its trademark only in the Supplemental
Register. A mark which is not registered in the Principal Register, and thus not
distinctive, has no real protection. 47(47) Indeed, we have held that registration in
the Supplemental Register is not even a prima facie evidence of the validity of the
registrants exclusive right to use the mark on the goods specified in the certificate.
48(48)

On Types of Confusion

Section 22 covers two types of confusion arising from the use of similar or
colorable imitation marks, namely, confusion of goods (product confusion) and
confusion of business (source or origin confusion). In Sterling Products
International, Incorporated v. Farbenfabriken Bayer Aktiengesellschaft, et al.,
49(49) the Court distinguished these two types of confusion, thus:

[Rudolf] Callman notes two types of confusion. The first is the confusion of
goods in which event the ordinarily prudent purchaser would be induced to
purchase one product in the belief that he was purchasing the other. . . . The
other is the confusion of business: Here though the goods of the parties are
different, the defendants product is such as might reasonably be assumed to
originate with the plaintiff, and the public would then be deceived either into
that belief or into the belief that there is some connection between the
plaintiff and defendant which, in fact, does not exist.

Under Act No. 666, 50(50) the first trademark law, infringement was limited to
confusion of goods only, when the infringing mark is used on goods of a similar
kind. 51(51) Thus, no relief was afforded to the party whose registered mark or its
colorable imitation is used on different although related goods. To remedy this
situation, Congress enacted RA 166 on 20 June 1947. In defining trademark
infringement, Section 22 of RA 166 deleted the requirement in question and
expanded its scope to include such use of the mark or its colorable imitation that is
likely to result in confusion on the source or origin of such goods or services, or
identity of such business. 52(52) Thus, while there is confusion of goods when the
products are competing, confusion of business exists when the products are
non-competing but related enough to produce confusion of affiliation. 53(53)

On Whether Confusion of Goods and


Confusion of Business are Applicable

Copyright 1994-2016 CD Technologies Asia, Inc. Jurisprudence 1901 to 2016 Third Release 19
Petitioners claim that respondents use of the Big Mak mark on
respondents hamburgers results in confusion of goods, particularly with respect to
petitioners hamburgers labeled Big Mac. Thus, petitioners alleged in their
complaint: IDTcHa

1.15. Defendants have unduly prejudiced and clearly infringed upon


the property rights of plaintiffs in the McDonalds Marks, particularly the
mark B[ig] M[ac]. Defendants unauthorized acts are likely, and
calculated, to confuse, mislead or deceive the public into believing that the
products and services offered by defendant Big Mak Burger, and the
business it is engaged in, are approved and sponsored by, or affiliated with,
plaintiffs. 54(54) (Emphasis supplied)

Since respondents used the Big Mak mark on the same goods, i.e. hamburger
sandwiches, that petitioners Big Mac mark is used, trademark infringement
through confusion of goods is a proper issue in this case.

Petitioners also claim that respondents use of the Big Mak mark in the
sale of hamburgers, the same business that petitioners are engaged in, results in
confusion of business. Petitioners alleged in their complaint:

1.10. For some period of time, and without the consent of plaintiff
McDonalds nor its licensee/franchisee, plaintiff McGeorge, and in clear
violation of plaintiffs exclusive right to use and/or appropriate the
McDonalds marks, defendant Big Mak Burger acting through individual
defendants, has been operating Big Mak Burger, a fast food restaurant
business dealing in the sale of hamburger and cheeseburger sandwiches,
french fries and other food products, and has caused to be printed on the
wrapper of defendants food products and incorporated in its signages the
name Big Mak Burger, which is confusingly similar to and/or is a
colorable imitation of the plaintiff McDonalds mark B[ig] M[ac], . . .
Defendant Big Mak Burger has thus unjustly created the impression that its
business is approved and sponsored by, or affiliated with, plaintiffs . . .

2.2 As a consequence of the acts committed by defendants, which


unduly prejudice and infringe upon the property rights of plaintiffs
McDonalds and McGeorge as the real owner and rightful proprietor, and the
licensee/franchisee, respectively, of the McDonalds marks, and which are
likely to have caused confusion or deceived the public as to the true source,
sponsorship or affiliation of defendants food products and restaurant
business, plaintiffs have suffered and continue to suffer actual damages in
the form of injury to their business reputation and goodwill, and of the
dilution of the distinctive quality of the McDonalds marks, in particular, the
mark B[ig] M[ac]. 55(55) (Emphasis supplied)

Copyright 1994-2016 CD Technologies Asia, Inc. Jurisprudence 1901 to 2016 Third Release 20
Respondents admit that their business includes selling hamburger sandwiches, the
same food product that petitioners sell using the Big Mac mark. Thus, trademark
infringement through confusion of business is also a proper issue in this case.

Respondents assert that their Big Mak hamburgers cater mainly to the
low-income group while petitioners Big Mac hamburgers cater to the middle
and upper income groups. Even if this is true, the likelihood of confusion of
business remains, since the low-income group might be led to believe that the Big
Mak hamburgers are the low-end hamburgers marketed by petitioners. After all,
petitioners have the exclusive right to use the Big Mac mark. On the other hand,
respondents would benefit by associating their low-end hamburgers, through the
use of the Big Mak mark, with petitioners high-end Big Mac hamburgers,
leading to likelihood of confusion in the identity of business.

Respondents further claim that petitioners use the Big Mac mark only on
petitioners double-decker hamburgers, while respondents use the Big Mak mark
on hamburgers and other products like siopao, noodles and pizza. Respondents
also point out that petitioners sell their Big Mac double-deckers in a styrofoam box
with the McDonalds logo and trademark in red, block letters at a price more
expensive than the hamburgers of respondents. In contrast, respondents sell their
Big Mak hamburgers in plastic wrappers and plastic bags. Respondents further
point out that petitioners restaurants are air-conditioned buildings with drive-thru
service, compared to respondents mobile vans.

These and other factors respondents cite cannot negate the undisputed fact
that respondents use their Big Mak mark on hamburgers, the same food product
that petitioners sell with the use of their registered mark Big Mac. Whether a
hamburger is single, double or triple-decker, and whether wrapped in plastic or
styrofoam, it remains the same hamburger food product. Even respondents use of
the Big Mak mark on non-hamburger food products cannot excuse their
infringement of petitioners registered mark, otherwise registered marks will lose
their protection under the law.

The registered trademark owner may use his mark on the same or similar
products, in different segments of the market, and at different price levels
depending on variations of the products for specific segments of the market. The
Court has recognized that the registered trademark owner enjoys protection in
product and market areas that are the normal potential expansion of his business.
Thus, the Court has declared:

Modern law recognizes that the protection to which the owner of a


trademark is entitled is not limited to guarding his goods or business from
actual market competition with identical or similar products of the parties,
Copyright 1994-2016 CD Technologies Asia, Inc. Jurisprudence 1901 to 2016 Third Release 21
but extends to all cases in which the use by a junior appropriator of a
trade-mark or trade-name is likely to lead to a confusion of source, as where
prospective purchasers would be misled into thinking that the complaining
party has extended his business into the field (see 148 ALR 56 et seq; 53 Am
Jur. 576) or is in any way connected with the activities of the infringer; or
when it forestalls the normal potential expansion of his business (v. 148
ALR, 77, 84; 52 Am. Jur. 576, 577). 56(56) (Emphasis supplied)

On Whether Respondents Use of the Big Mak


Mark Results in Likelihood of Confusion

In determining likelihood of confusion, jurisprudence has developed two


tests, the dominancy test and the holistic test. 57(57) The dominancy test focuses
on the similarity of the prevalent features of the competing trademarks that might
cause confusion. In contrast, the holistic test requires the court to consider the
entirety of the marks as applied to the products, including the labels and
packaging, in determining confusing similarity.

The Court of Appeals, in finding that there is no likelihood of confusion


that could arise in the use of respondents Big Mak mark on hamburgers, relied
on the holistic test. Thus, the Court of Appeals ruled that it is not sufficient that a
similarity exists in both name(s), but that more importantly, the overall
presentation, or in their essential, substantive and distinctive parts is such as would
likely MISLEAD or CONFUSE persons in the ordinary course of purchasing the
genuine article. The holistic test considers the two marks in their entirety, as they
appear on the goods with their labels and packaging. It is not enough to consider
their words and compare the spelling and pronunciation of the words. 58(58)

Respondents now vigorously argue that the Court of Appeals application of


the holistic test to this case is correct and in accord with prevailing jurisprudence.

This Court, however, has relied on the dominancy test rather than the
holistic test. The dominancy test considers the dominant features in the competing
marks in determining whether they are confusingly similar. Under the dominancy
test, courts give greater weight to the similarity of the appearance of the product
arising from the adoption of the dominant features of the registered mark,
disregarding minor differences. 59(59) Courts will consider more the aural and
visual impressions created by the marks in the public mind, giving little weight to
factors like prices, quality, sales outlets and market segments.

Thus, in the 1954 case of Co Tiong Sa v. Director of Patents, 60(60) the


Court ruled:

. . . It has been consistently held that the question of infringement of


Copyright 1994-2016 CD Technologies Asia, Inc. Jurisprudence 1901 to 2016 Third Release 22
a trademark is to be determined by the test of dominancy. Similarity in size,
form and color, while relevant, is not conclusive. If the competing trademark
contains the main or essential or dominant features of another, and
confusion and deception is likely to result, infringement takes place.
Duplication or imitation is not necessary; nor is it necessary that the
infringing label should suggest an effort to imitate. (G. Heilman Brewing Co.
vs. Independent Brewing Co., 191 F., 489, 495, citing Eagle White Lead Co.
vs. Pflugh (CC) 180 Fed. 579). The question at issue in cases of
infringement of trademarks is whether the use of the marks involved would
be likely to cause confusion or mistakes in the mind of the public or deceive
purchasers. (Auburn Rubber Corporation vs. Honover Rubber Co., 107 F. 2d
588; . . .) (Emphasis supplied.)

The Court reiterated the dominancy test in Lim Hoa v. Director of Patents,
61(61) Phil. Nut Industry, Inc. v. Standard Brands Inc., 62(62) Converse Rubber
Corporation v. Universal Rubber Products, Inc., 63(63) and Asia Brewery, Inc. v.
Court of Appeals. 64(64) In the 2001 case of Societe Des Produits Nestl, S.A. v.
Court of Appeals, 65(65) the Court explicitly rejected the holistic test in this wise:

[T]he totality or holistic test is contrary to the elementary postulate of the


law on trademarks and unfair competition that confusing similarity is to be
determined on the basis of visual, aural, connotative comparisons and
overall impressions engendered by the marks in controversy as they are
encountered in the realities of the marketplace. (Emphasis supplied)

The test of dominancy is now explicitly incorporated into law in Section


155.1 of the Intellectual Property Code which defines infringement as the
colorable imitation of a registered mark . . . or a dominant feature thereof.

Applying the dominancy test, the Court finds that respondents use of the
Big Mak mark results in likelihood of confusion. First, Big Mak sounds
exactly the same as Big Mac. Second, the first word in Big Mak is exactly the
same as the first word in Big Mac. Third, the first two letters in Mak are the
same as the first two letters in Mac. Fourth, the last letter in Mak while a k
sounds the same as c when the word Mak is pronounced. Fifth, in Filipino, the
letter k replaces c in spelling, thus Caloocan is spelled Kalookan.

In short, aurally the two marks are the same, with the first word of both
marks phonetically the same, and the second word of both marks also phonetically
the same. Visually, the two marks have both two words and six letters, with the
first word of both marks having the same letters and the second word having the
same first two letters. In spelling, considering the Filipino language, even the last
letters of both marks are the same.

Copyright 1994-2016 CD Technologies Asia, Inc. Jurisprudence 1901 to 2016 Third Release 23
Clearly, respondents have adopted in Big Mak not only the dominant but
also almost all the features of Big Mac. Applied to the same food product of
hamburgers, the two marks will likely result in confusion in the public mind.

The Court has taken into account the aural effects of the words and letters
contained in the marks in determining the issue of confusing similarity. Thus, in
Marvex Commercial Co., Inc. v. Petra Hawpia & Co., et al., 66(66) the Court
held: aAHTDS

The following random list of confusingly similar sounds in the


matter of trademarks, culled from Nims, Unfair Competition and Trade
Marks, 1947, Vol. 1, will reinforce our view that SALONPAS and
LIONPAS are confusingly similar in sound: Gold Dust and Gold
Drop; Jantzen and Jass-Sea; Silver Flash and Supper Flash;
Cascarete and Celborite; Celluloid and Cellonite; Chartreuse and
Charseurs; Cutex and Cuticlean; Hebe and Meje; Kotex and
Femetex; Zuso and Hoo Hoo. Leon Amdur, in his book Trade-Mark
Law and Practice, pp. 419421, cities, as coming within the purview of the
idem sonans rule, Yusea and U-C-A, Steinway Pianos and Steinberg
Pianos, and Seven-Up and Lemon-Up. In Co Tiong vs. Director of
Patents, this Court unequivocally said that Celdura and Cordura are
confusingly similar in sound; this Court held in Sapolin Co. vs. Balmaceda,
67 Phil. 795 that the name Lusolin is an infringement of the trademark
Sapolin, as the sound of the two names is almost the same. (Emphasis
supplied)

Certainly, Big Mac and Big Mak for hamburgers create even greater
confusion, not only aurally but also visually.

Indeed, a person cannot distinguish Big Mac from Big Mak by their
sound. When one hears a Big Mac or Big Mak hamburger advertisement over
the radio, one would not know whether the Mac or Mak ends with a c or a
k.

Petitioners aggressive promotion of the Big Mac mark, as borne by their


advertisement expenses, has built goodwill and reputation for such mark making it
one of the easily recognizable marks in the market today. This increases the
likelihood that consumers will mistakenly associate petitioners hamburgers and
business with those of respondents.

Respondents inability to explain sufficiently how and why they came to


choose Big Mak for their hamburger sandwiches indicates their intent to imitate
petitioners Big Mac mark. Contrary to the Court of Appeals finding,
respondents claim that their Big Mak mark was inspired by the first names of
Copyright 1994-2016 CD Technologies Asia, Inc. Jurisprudence 1901 to 2016 Third Release 24
respondent Dys mother (Maxima) and father (Kimsoy) is not credible. As
petitioners well noted:

[R]espondents, particularly Respondent Mr. Francis Dy, could have


arrived at a more creative choice for a corporate name by using the names of
his parents, especially since he was allegedly driven by sentimental reasons.
For one, he could have put his fathers name ahead of his mothers, as is
usually done in this patriarchal society, and derived letters from said names
in that order. Or, he could have taken an equal number of letters (i.e., two)
from each name, as is the more usual thing done. Surely, the more plausible
reason behind Respondents choice of the word M[ak], especially when
taken in conjunction with the word B[ig], was their intent to take
advantage of Petitioners . . . B[ig] M[ac] trademark, with their alleged
sentiment-focused explanation merely thought of as a convenient, albeit
unavailing, excuse or defense for such an unfair choice of name. 67(67)

Absent proof that respondents adoption of the Big Mak mark was due to
honest mistake or was fortuitous, 68(68) the inescapable conclusion is that
respondents adopted the Big Mak mark to ride on the coattails of the more
established Big Mac mark. 69(69) This saves respondents much of the expense
in advertising to create market recognition of their mark and hamburgers. 70(70)

Thus, we hold that confusion is likely to result in the public mind. We


sustain petitioners claim of trademark infringement.

On the Lack of Proof of


Actual Confusion

Petitioners failure to present proof of actual confusion does not negate their
claim of trademark infringement. As noted in American Wire & Cable Co. v.
Director of Patents, 71(71) Section 22 requires the less stringent standard of
likelihood of confusion only. While proof of actual confusion is the best
evidence of infringement, its absence is inconsequential. 72(72)

On the Issue of Unfair Competition

Section 29 (Section 29) 73(73) of RA 166 defines unfair competition,


thus:

xxx xxx xxx

Any person who will employ deception or any other means contrary
to good faith by which he shall pass off the goods manufactured by him or in
which he deals, or his business, or services for those of the one having
established such goodwill, or who shall commit any acts calculated to
Copyright 1994-2016 CD Technologies Asia, Inc. Jurisprudence 1901 to 2016 Third Release 25
produce said result, shall be guilty of unfair competition, and shall be subject
to an action therefor.

In particular, and without in any way limiting the scope of unfair


competition, the following shall be deemed guilty of unfair competition:

(a) Any person, who in selling his goods shall give them the
general appearance of goods of another manufacturer or dealer, either as to
the goods themselves or in the wrapping of the packages in which they are
contained, or the devices or words thereon, or in any feature of their
appearance, which would be likely to influence purchasers to believe that the
goods offered are those of a manufacturer or dealer, other than the actual
manufacturer or dealer, or who otherwise clothes the goods with such
appearance as shall deceive the public and defraud another of his legitimate
trade, or any subsequent vendor of such goods or any agent of any vendor
engaged in selling such goods with a like purpose;

(b) Any person who by any artifice, or device, or who employs any
other means calculated to induce the false belief that such person is offering
the services of another who has identified such services in the mind of the
public; or

(c) Any person who shall make any false statement in the course of
trade or who shall commit any other act contrary to good faith of a nature
calculated to discredit the goods, business or services of another. (Emphasis
supplied)

The essential elements of an action for unfair competition are (1) confusing
similarity in the general appearance of the goods, and (2) intent to deceive the
public and defraud a competitor. 74(74) The confusing similarity may or may not
result from similarity in the marks, but may result from other external factors in the
packaging or presentation of the goods. The intent to deceive and defraud may be
inferred from the similarity of the appearance of the goods as offered for sale to
the public. 75(75) Actual fraudulent intent need not be shown. 76(76)

Unfair competition is broader than trademark infringement and includes


passing off goods with or without trademark infringement. Trademark
infringement is a form of unfair competition. 77(77) Trademark infringement
constitutes unfair competition when there is not merely likelihood of confusion,
but also actual or probable deception on the public because of the general
appearance of the goods. There can be trademark infringement without unfair
competition as when the infringer discloses on the labels containing the mark that
he manufactures the goods, thus preventing the public from being deceived that the
goods originate from the trademark owner. 78(78)

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To support their claim of unfair competition, petitioners allege that
respondents fraudulently passed off their hamburgers as Big Mac hamburgers.
Petitioners add that respondents fraudulent intent can be inferred from the
similarity of the marks in question. 79(79)

Passing off (or palming off) takes place where the defendant, by imitative
devices on the general appearance of the goods, misleads prospective purchasers
into buying his merchandise under the impression that they are buying that of his
competitors. 80(80) Thus, the defendant gives his goods the general appearance of
the goods of his competitor with the intention of deceiving the public that the
goods are those of his competitor.

The RTC described the respective marks and the goods of petitioners and
respondents in this wise:

The mark B[ig] M[ac] is used by plaintiff McDonalds to identify


its double decker hamburger sandwich. The packaging material is a
styrofoam box with the McDonalds logo and trademark in red with block
capital letters printed on it. All letters of the B[ig] M[ac] mark are also in
red and block capital letters. On the other hand, defendants B[ig] M[ak]
script print is in orange with only the letter B and M being capitalized
and the packaging material is plastic wrapper. . . Further, plaintiffs logo and
mascot are the umbrella M and Ronald McDonalds, respectively,
compared to the mascot of defendant Corporation which is a chubby boy
called Macky displayed or printed between the words Big and Mak.
81(81) (Emphasis supplied)

Respondents point to these dissimilarities as proof that they did not give their
hamburgers the general appearance of petitioners Big Mac hamburgers.

The dissimilarities in the packaging are minor compared to the stark


similarities in the words that give respondents Big Mak hamburgers the general
appearance of petitioners Big Mac hamburgers. Section 29(a) expressly
provides that the similarity in the general appearance of the goods may be in the
devices or words used on the wrappings. Respondents have applied on their
plastic wrappers and bags almost the same words that petitioners use on their
styrofoam box. What attracts the attention of the buying public are the words Big
Mak which are almost the same, aurally and visually, as the words Big Mac.
The dissimilarities in the material and other devices are insignificant compared to
the glaring similarity in the words used in the wrappings.

Section 29(a) also provides that the defendant gives his goods the general
appearance of goods of another manufacturer. Respondents goods are
hamburgers which are also the goods of petitioners. If respondents sold egg
Copyright 1994-2016 CD Technologies Asia, Inc. Jurisprudence 1901 to 2016 Third Release 27
sandwiches only instead of hamburger sandwiches, their use of the Big Mak
mark would not give their goods the general appearance of petitioners Big Mac
hamburgers. In such case, there is only trademark infringement but no unfair
competition. However, since respondents chose to apply the Big Mak mark on
hamburgers, just like petitioners use of the Big Mac mark on hamburgers,
respondents have obviously clothed their goods with the general appearance of
petitioners goods. ASTcEa

Moreover, there is no notice to the public that the Big Mak hamburgers
are products of L.C. Big Mak Burger, Inc. Respondents introduced during the
trial plastic wrappers and bags with the words L.C. Big Mak Burger, Inc. to
inform the public of the name of the seller of the hamburgers. However, petitioners
introduced during the injunctive hearings plastic wrappers and bags with the Big
Mak mark without the name L.C. Big Mak Burger, Inc. Respondents belated
presentation of plastic wrappers and bags bearing the name of L.C. Big Mak
Burger, Inc. as the seller of the hamburgers is an after-thought designed to
exculpate them from their unfair business conduct. As earlier stated, we cannot
consider respondents evidence since petitioners complaint was based on facts
existing before and during the injunctive hearings.

Thus, there is actually no notice to the public that the Big Mak
hamburgers are products of L.C. Big Mak Burger, Inc. and not those of
petitioners who have the exclusive right to the Big Mac mark. This clearly shows
respondents intent to deceive the public. Had respondents placed a notice on their
plastic wrappers and bags that the hamburgers are sold by L.C. Big Mak Burger,
Inc., then they could validly claim that they did not intend to deceive the public.
In such case, there is only trademark infringement but no unfair competition.
82(82) Respondents, however, did not give such notice. We hold that as found by
the RTC, respondent corporation is liable for unfair competition.

The Remedies Available to Petitioners

Under Section 23 83(83) (Section 23) in relation to Section 29 of RA 166,


a plaintiff who successfully maintains trademark infringement and unfair
competition claims is entitled to injunctive and monetary reliefs. Here, the RTC
did not err in issuing the injunctive writ of 16 August 1990 (made permanent in its
Decision of 5 September 1994) and in ordering the payment of P400,000 actual
damages in favor of petitioners. The injunctive writ is indispensable to prevent
further acts of infringement by respondent corporation. Also, the amount of actual
damages is a reasonable percentage (11.9%) of respondent corporations gross
sales for three (19881989 and 1991) of the six years (19841990) respondents
have used the Big Mak mark. 84(84)

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The RTC also did not err in awarding exemplary damages by way of
correction for the public good 85(85) in view of the finding of unfair competition
where intent to deceive the public is essential. The award of attorneys fees and
expenses of litigation is also in order. 86(86)

WHEREFORE, we GRANT the instant petition. We SET ASIDE the


Decision dated 26 November 1999 of the Court of Appeals and its Resolution
dated 11 July 2000 and REINSTATE the Decision dated 5 September 1994 of the
Regional Trial Court of Makati, Branch 137, finding respondent L.C. Big Mak
Burger, Inc. liable for trademark infringement and unfair competition.

SO ORDERED.

Davide, Jr., C .J ., Quisumbing, Ynares-Santiago and Azcuna, JJ ., concur.

Footnotes
1. Under Rule 45 of the 1997 Rules of Civil Procedure.
2. Penned by Associate Justice Eloy R. Bello, Jr. with Presiding Justice Jainal D.
Rasul and Associate Justice Ruben T. Reyes concurring.
3. Penned by Judge Santiago Ranada, Jr.
4. Itself a registered service mark.
5. Some of McDonalds registered marks representing food items (f) and services (s)
are: McDONALDS HAMBURGERS (s); McDONALDS (f); RONALD
McDONALD (s); McDONALDLAND (s); McCHEESE & DESIGN (f); EGG
McMUFFIN (s); EGG McMUFFIN (f); McDONALDLAND (f); McDONALDS
& ARCHES (s); McFEAST (f); McCHICKEN (f); McDONALDS & ARCHES
(f); McDONUTS (f); McPIZZA (f); McPIZZA (s); McHAPPY DAY (s); MINI
MAC (s); McDOUBLE (f); TOGETHER-McDONALDS & YOU (s); CHICKEN
McNUGGETS (f); McDONALDS & YOU (s); SUPER MAC (f); McSNACK
(s); MAC FRIES (f); McRIB (f); MAPLE McCRISP (f); LITE MAC (f); BIG
MAC (s); CHICKEN McSWISS (f); McMUFFIN (f); McD.L.T. (f). (McDonalds
Corporation v. McBagels, Inc., 649 F.Supp. 1268 [1986]).
6. Aside from Big Mac sandwiches, McDonalds menu includes cheeseburgers,
special sandwiches, fried french potatoes, chicken nuggets, fried fish sandwiches,
shakes, hot pies, sundaes, softdrinks, and other beverages.
7. Certificate of Registration No. 1,126,102.
8. Table napkins, tray liners, cups and food wrappers.
9. Labels, promotional items and packages.
10. TSN (Arlene Manalo), 26 July 1990, pp. 3435.
11. McDonalds and petitioner McGeorge are referred to as petitioners.
12. Rizal, Laguna, Bulacan and Quezon.
13. E.g. pizzas, noodles, siopaos, hotdog sandwiches, ham sandwiches, fish burgers,
fruit juices, softdrinks and other beverages.
14. Respondent corporation and private respondents are referred to as respondents.
Copyright 1994-2016 CD Technologies Asia, Inc. Jurisprudence 1901 to 2016 Third Release 29
15. Records, p. 37.
16. Ibid., pp. 457458.
17. Ibid., pp. 414426.
18. Ibid., pp. 460463.
19. Rollo, pp. 149154.
20. Records, pp. 14311432.
21. Rollo, pp. 233237 (Capitalization in the original).
22. Ibid., p. 24.
23. While petitioners seek to hold liable respondent corporation only, the Courts
opinion will refer not only to the latter but also to all the respondents as all of
them filed the pleadings in this petition.
24. This provision states: Filing of petition with Supreme Court. A party desiring
to appeal by certiorari from a judgment or final order or resolution of the Court of
Appeals, the Sandiganbayan, the Regional Trial Court or other courts whenever
authorized by law, may file with the Supreme Court a verified petition for review
on certiorari. The petition shall raise only questions of law which must be
distinctly set forth.
25. Ramos, et al. v. Pepsi-Cola Bottling Co. of the Phils., et al., 125 Phil. 701 (1967).
26. Ducusin, et al. v. CA, et al., 207 Phil. 248 (1983).
27. G.R. No. 103543, 5 July 1993, 224 SCRA 437.
28. Exhibits E-1 to 2, F-1 to 2 and G-1 to 2.
29. Exhibits E, F and G.
30. Exhibits L-10, L-16 to 27.
31. Exhibits 34, 3637.
32. RA 166 has been superseded by Republic Act No. 8293 (RA 8293), the
Intellectual Property Code of the Philippines, which took effect on 1 January
1998. Section 22 is substantially identical with Section 16 of the United States
1946 Trademark Act (Lanham Act).
33. Superseded by Section 155 of RA 8293 (Section 155).
34. See A & H Sportswear Co. v. Victorias Secret Stores, Inc., 167 F.Supp.2d 770
(2001).
35. Shaleys Inc. v. Covalt, 704 F.2d 426 (1983). Also referred to as the lynchpin
(Suncoast Tours, Inc. v. Lambert Groups, Inc. 1999 WL 1034683 [1999]) or
touchstone (VMG Enterprises, Inc. v. F. Quesada and Franco, Inc., 788 F.
Supp. 648 [1992]) of trademark infringement.
36. This provision states: Registration of trade-marks, trade-names and
service-marks on the principal register. There is hereby established a register
of trade-marks, trade-names and service-marks which shall be known as the
principal register. The owner of a trade-mark, trade-name or service-mark used to
distinguish his goods, business or services from the goods, business or services of
others shall have the right to register the same on the principal register, unless it:
(a) Consists of or comprises immoral, deceptive or scandalous matter; or
matter which may disparage or falsely suggest a connection with persons, living or
dead, institutions, beliefs, or national symbols, or bring them into contempt or
disrepute;
(b) Consists of or comprises the flag or coat of arms or other insignia of
Copyright 1994-2016 CD Technologies Asia, Inc. Jurisprudence 1901 to 2016 Third Release 30
the Philippines or any of its political subdivisions, or of any foreign nation, or any
simulation thereof;
(c) Consists of or comprises a name, portrait, or signature identifying a
particular living individual except by his written consent, or the name, signature,
or portrait of a deceased President of the Philippines, during the life of his widow,
if any, except by the written consent of the widow;
(d) Consists of or comprises a mark or trade-name which so resembles a
mark or trade-name registered in the Philippines or a mark or a trade-name
previously used in the Philippines by another and not abandoned, as to be likely,
when applied to or used in connection with the goods, business or services of the
applicant, to cause confusion or mistake or to deceive purchasers; or
(e) Consists of a mark or trade-name which, when applied to or used in
connection with the goods, business or services of the applicant is merely
descriptive or deceptively misdescriptive of them, or when applied to or used in
connection with the goods, business or services of the applicant is primarily
geographically descriptive or deceptively misdescriptive of them, or is primarily
merely a surname;
(f) Except as expressly excluded in paragraphs (a), (b), (c) and (d) of
this section nothing herein shall prevent the registration of a mark or trade-name
used by the applicant which has become distinctive of the applicants goods,
business or services. The Director may accept as prima facie evidence that the
mark or trade-name has become distinctive, as applied to or used in connection
with the applicants goods, business or services, proof of substantially exclusive
and continuous use thereof as a mark or trade-name by the applicant in connection
with the sale of goods, business or services for five years next preceding the date
of the filing of the application for its registration. This has been superseded by
Section 123 of RA 8293.
37. Section 20, RA 166. This provision states: Certificate of registration prima facie
evidence of validity. A certificate of registration of a mark or trade-name shall
be prima facie evidence of the validity of the registration, the registrants
ownership of the mark or trade-name, and of the registrants exclusive right to use
the same in connection with the goods, business or services specified in the
certificate, subject to any conditions and limitations stated therein. This has been
superseded by Section 138 of RA 8293. Neither RA 166 nor RA 8293 provides
when the presumption of validity and ownership becomes indubitable. In contrast,
under the Lanham Act, as amended, (15 United States Code 1065), such takes
place once the trademark has become incontestable i.e. after the mark owner
files affidavits stating that the mark is registered and has been in continuous use
for five consecutive years; that there is no pending proceeding; and that there has
been no adverse decision concerning the registrants ownership or right to
registration (See Luis Vuitton Malletier and Oakley, Inc. v. Veit, 211 F.Supp.2d
556 [2002]). However, both RA 166 (Section 12) and RA 8293 (Section 145)
require the filing of the affidavit attesting to the continuous use of the mark for
five years and, under Section 145, failure to file such affidavit will result in the
removal of the mark from the Register.
38. Rollo, pp. 525527.
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39. Societe Des Produits Nestl, S.A. v. Court of Appeals, G.R. No. 112012, 4 April
2001, 356 SCRA 207; McKee Baking Co. v. Interstate Brands Corporation, 738
F. Supp. 1272 (1990).
40. Societe Des Produits Nestl, S.A. v. Court of Appeals, supra note 39; Miller
Brewing Co. v. Heileman Brewing Co., 561 F.2d 75 (1977).
41. Miller Brewing Co. v. Heileman Brewing Co., supra note 40.
42. A. J. Canfield Co. v. Honickman, 808 F.2d 291 (1986).
43. Societe Des Produits Nestl, S.A. v. Court of Appeals, supra note 39 citing
43(A) of the Lanham Act, as amended.
44. Bernard v. Commerce Drug Co., 964 F.2d 1338 (1992).
45. Keebler Co. v. Rovira Biscuit Corp., 624 F.2d 366 (1980).
46. McKee Baking Co. v. Interstate Brands Corporation, supra note 39.
47. See A. Miller and M. Davis, Intellectual Property, Patents, Trademarks and
Copyright in a Nutshell 177178 (1983).
48. See Lorenzana v. Macagba, No. L-33773, 22 October 1987, 154 SCRA 723; La
Chemise Lacoste, S.A. v. Hon. Fernandez, etc., et al. 214 Phil. 332 (1984). RA
8293 no longer provides for a Supplemental Register and instead mandates a
single registry system (Section 137). Under Section 239, marks registered in the
Supplemental Register under RA 166 will remain in force but are no longer
subject to renewal.
49. 137 Phil. 838 (1969).
50. Enacted on 6 March 1903.
51. Section 3 of Act No. 666 provides: The ownership or possession of a trade-mark,
heretofore or hereafter appropriated, as in the foregoing section provided, shall be
recognized and protected in the same manner and to the same extent, as are other
property rights known to the law. To this end any person entitled to the exclusive
use of a trade-mark to designate the origin or ownership of goods he has made or
deals in may recover damages in a civil action from any person who has sold
goods of a similar kind, bearing such trade-mark, and the measure of the damages
suffered, at the option of the complaining party, shall be either the reasonable
profit which the complaining party would have made had the defendant not sold
the goods with the trade-mark aforesaid, or the profit which the defendant actually
made out of the sale of the goods with the trade-mark, and in cases where actual
intent to mislead the public or to defraud the owner of the trade-mark shall be
shown, in the discretion of the court, the damages may be doubled. The
complaining party, upon proper showing, may have a preliminary injunction,
restraining the defendant temporarily from use of the trade-mark pending the
hearing, to be granted or dissolved in the manner provided in the Code of Civil
Procedure, and such injunction upon final hearing, if the complainants property
in the trade-mark and the defendants violation thereof shall be fully established,
shall be made perpetual, and this injunction shall be part of the judgment for
damages to be rendered in the same cause as above provided. (Emphasis
supplied)
52. The United States Congress had introduced the same amendment to the Lanham
Act in 1946. In 1962, the US Congress again amended Section 16 of the Lanham
Act (Sec. 43(A)) by deleting the phrase the source or origin of such goods or
Copyright 1994-2016 CD Technologies Asia, Inc. Jurisprudence 1901 to 2016 Third Release 32
services, or identity of such business in the definition of trademark infringement.
This led courts in that jurisdiction to hold that post-sale confusion by the public at
large (Esercizio v. Roberts, 944 F.2d 1235 [1991]. See also Koppers Company,
Inc. v. Krup-Koppers, 517 F.Supp. 836 [1981]) or subliminal confusion, defined
as confusion on a subliminal or subconscious level, causing the consumer to
identify the properties and reputation of one product with those of another,
although he can identify the particular manufacturer of each, (Ortho
Pharmaceutical Corporation v. American Cyanamid Company, 361 F.Supp. 1032
[1973]. See also Farberware, Inc. v. Mr. Coffee, Inc., 740 F.Supp. 291 (1990);
Dreyfus Fund Incorporated v. Royal Bank of Canada, 525 F. Supp. 1108 [1981])
are sufficient to sustain a trademark infringement claim. Section 155 substantially
reproduces Sec. 43(A).
53. Agpalo, The Law on Trademark, Infringement and Unfair Competition 4546
(2000).
54. Records, p. 5.
55. Ibid., pp. 4, 67.
56. Sta. Ana v. Maliwat, et al., 133 Phil. 1006 (1968).
57. Societe Des Produits Nestl, S.A. v. Court of Appeals, supra note 39; Emerald
Garment Manufacturing Corporation v. Court of Appeals, G.R. No. 100098, 29
December 1995, 251 SCRA 600.
58. V. Amador, Trademarks Under The Intellectual Property Code 260 (1999).
59. Ibid., p. 263.
60. 95 Phil. 1 (1954).
61. 100 Phil. 214 (1956).
62. No. L-23035, 31 July 1975, 65 SCRA 575.
63. No. L-27906, 8 January 1987, 147 SCRA 154.
64. Supra note 27.
65. Supra note 39.
66. 125 Phil. 295 (1966).
67. Rollo, pp. 588589.
68. Time v. Life Television Co. of St. Paul, 123 F. Supp. 470 (1954);
69. Conde Nast Publications v. Vogue School of Fashion Modelling, 105 F. Supp. 325
(1952); Hanson v. Triangle Publications, 163 F.2d 74 (1947).
70. See Fisons Horticulture, Inc. v. Vigoro Industries, Inc., 30 F.3d 466 (1994).
71. No. L-26557, 18 February 1970, 31 SCRA 544.
72. PACCAR Inc. v. Tele Scan Technologies, L.L.C., 319 F.3d 243 (2003).
73. Reiterated in Section 168 of RA 8293.
74. V. Amador, supra note 58 at 278.
75. Shell Co. of the Philippines, Ltd. v. Ins. Petroleum Refining Co., Ltd., 120 Phil.
434 (1964); La Insular v. Jao Oge, 42 Phil. 366 (1921).
76. Alhambra Cigar, etc., Co. v. Mojica, 27 Phil. 266 (1914).
77. Co Tiong Sa v. Director of Patents, supra note 60; Clarke v. Manila Candy Co.,
36 Phil. 100 (1917).
78. See Q-Tips, Inc. v. Johnson & Johnson, 108 F.Supp 845 (1952).
79. Rollo, pp. 4045.
80. Suncoast Tours, Inc. v. Lambert Groups, Inc. 1999 WL 1034683 (1999).
Copyright 1994-2016 CD Technologies Asia, Inc. Jurisprudence 1901 to 2016 Third Release 33
81. Rollo, pp. 148149.
82. See Q-Tips, Inc. v. Johnson & Johnson, supra note 78.
83. This provision reads: Actions, and damages and injunction for infringement.
Any person entitled to the exclusive use of a registered mark or trade-name may
recover damages in a civil action from any person who infringes his rights, and the
measure of the damages suffered shall be either the reasonable profit which the
complaining party would have made, had the defendant not infringed his said
rights, or the profit which the defendant actually made out of the infringement, or
in the event such measure of damages cannot be readily ascertained with
reasonable certainty, then the court may award as damages a reasonable
percentage based upon the amount of gross sales of the defendant of the value of
the services in connection with which the mark or trade-name was used in the
infringement of the rights of the complaining party. In cases where actual intent to
mislead the public or to defraud the complaining party shall be shown, in the
discretion of the court, the damages may be doubled.
The complaining party, upon proper showing, may also be granted
injunction.
84. TSN, (Francis Dy), 15 March 1993, p. 32; TSN (Francis Dy), 22 March 1993, pp.
12.
85. Article 2229, Civil Code.
86. Article 2208(1), Civil Code.

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Endnotes

1 (Popup - Popup)
1. Under Rule 45 of the 1997 Rules of Civil Procedure.

2 (Popup - Popup)
2. Penned by Associate Justice Eloy R. Bello, Jr. with Presiding Justice Jainal D.
Rasul and Associate Justice Ruben T. Reyes concurring.

3 (Popup - Popup)
3. Penned by Judge Santiago Ranada, Jr.

4 (Popup - Popup)
4. Itself a registered service mark.

5 (Popup - Popup)
5. Some of McDonalds registered marks representing food items (f) and services (s)
are: McDONALDS HAMBURGERS (s); McDONALDS (f); RONALD
McDONALD (s); McDONALDLAND (s); McCHEESE & DESIGN (f); EGG
McMUFFIN (s); EGG McMUFFIN (f); McDONALDLAND (f); McDONALDS
& ARCHES (s); McFEAST (f); McCHICKEN (f); McDONALDS & ARCHES
(f); McDONUTS (f); McPIZZA (f); McPIZZA (s); McHAPPY DAY (s); MINI
MAC (s); McDOUBLE (f); TOGETHER-McDONALDS & YOU (s); CHICKEN
McNUGGETS (f); McDONALDS & YOU (s); SUPER MAC (f); McSNACK
(s); MAC FRIES (f); McRIB (f); MAPLE McCRISP (f); LITE MAC (f); BIG
MAC (s); CHICKEN McSWISS (f); McMUFFIN (f); McD.L.T. (f). (McDonalds
Corporation v. McBagels, Inc., 649 F.Supp. 1268 [1986]).

6 (Popup - Popup)
6. Aside from Big Mac sandwiches, McDonalds menu includes cheeseburgers,
special sandwiches, fried french potatoes, chicken nuggets, fried fish sandwiches,
shakes, hot pies, sundaes, softdrinks, and other beverages.

7 (Popup - Popup)
7. Certificate of Registration No. 1,126,102.
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8 (Popup - Popup)
8. Table napkins, tray liners, cups and food wrappers.

9 (Popup - Popup)
9. Labels, promotional items and packages.

10 (Popup - Popup)
10. TSN (Arlene Manalo), 26 July 1990, pp. 3435.

11 (Popup - Popup)
11. McDonalds and petitioner McGeorge are referred to as petitioners.

12 (Popup - Popup)
12. Rizal, Laguna, Bulacan and Quezon.

13 (Popup - Popup)
13. E.g. pizzas, noodles, siopaos, hotdog sandwiches, ham sandwiches, fish burgers,
fruit juices, softdrinks and other beverages.

14 (Popup - Popup)
14. Respondent corporation and private respondents are referred to as respondents.

15 (Popup - Popup)
15. Records, p. 37.

16 (Popup - Popup)
16. Ibid., pp. 457458.

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17 (Popup - Popup)
17. Ibid., pp. 414426.

18 (Popup - Popup)
18. Ibid., pp. 460463.

19 (Popup - Popup)
19. Rollo, pp. 149154.

20 (Popup - Popup)
20. Records, pp. 14311432.

21 (Popup - Popup)
21. Rollo, pp. 233237 (Capitalization in the original).

22 (Popup - Popup)
22. Ibid., p. 24.

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23. While petitioners seek to hold liable respondent corporation only, the Courts
opinion will refer not only to the latter but also to all the respondents as all of
them filed the pleadings in this petition.

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24. This provision states: Filing of petition with Supreme Court. A party desiring
to appeal by certiorari from a judgment or final order or resolution of the Court of
Appeals, the Sandiganbayan, the Regional Trial Court or other courts whenever
authorized by law, may file with the Supreme Court a verified petition for review
on certiorari. The petition shall raise only questions of law which must be
distinctly set forth.

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25. Ramos, et al. v. Pepsi-Cola Bottling Co. of the Phils., et al., 125 Phil. 701 (1967).

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26. Ducusin, et al. v. CA, et al., 207 Phil. 248 (1983).

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27. G.R. No. 103543, 5 July 1993, 224 SCRA 437.

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28. Exhibits E-1 to 2, F-1 to 2 and G-1 to 2.

29 (Popup - Popup)
29. Exhibits E, F and G.

30 (Popup - Popup)
30. Exhibits L-10, L-16 to 27.

31 (Popup - Popup)
31. Exhibits 34, 3637.

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32. RA 166 has been superseded by Republic Act No. 8293 (RA 8293), the
Intellectual Property Code of the Philippines, which took effect on 1 January
1998. Section 22 is substantially identical with Section 16 of the United States
1946 Trademark Act (Lanham Act).

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33. Superseded by Section 155 of RA 8293 (Section 155).

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34. See A & H Sportswear Co. v. Victorias Secret Stores, Inc., 167 F.Supp.2d 770
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(2001).

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35. Shaleys Inc. v. Covalt, 704 F.2d 426 (1983). Also referred to as the lynchpin
(Suncoast Tours, Inc. v. Lambert Groups, Inc. 1999 WL 1034683 [1999]) or
touchstone (VMG Enterprises, Inc. v. F. Quesada and Franco, Inc., 788 F. Supp.
648 [1992]) of trademark infringement.

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36. This provision states: Registration of trade-marks, trade-names and
service-marks on the principal register. There is hereby established a register of
trade-marks, trade-names and service-marks which shall be known as the principal
register. The owner of a trade-mark, trade-name or service-mark used to
distinguish his goods, business or services from the goods, business or services of
others shall have the right to register the same on the principal register, unless it:
(a) Consists of or comprises immoral, deceptive or scandalous matter; or
matter which may disparage or falsely suggest a connection with persons, living or
dead, institutions, beliefs, or national symbols, or bring them into contempt or
disrepute;
(b) Consists of or comprises the flag or coat of arms or other insignia of
the Philippines or any of its political subdivisions, or of any foreign nation, or any
simulation thereof;
(c) Consists of or comprises a name, portrait, or signature identifying a
particular living individual except by his written consent, or the name, signature,
or portrait of a deceased President of the Philippines, during the life of his widow,
if any, except by the written consent of the widow;
(d) Consists of or comprises a mark or trade-name which so resembles a
mark or trade-name registered in the Philippines or a mark or a trade-name
previously used in the Philippines by another and not abandoned, as to be likely,
when applied to or used in connection with the goods, business or services of the
applicant, to cause confusion or mistake or to deceive purchasers; or
(e) Consists of a mark or trade-name which, when applied to or used in
connection with the goods, business or services of the applicant is merely
descriptive or deceptively misdescriptive of them, or when applied to or used in
connection with the goods, business or services of the applicant is primarily
geographically descriptive or deceptively misdescriptive of them, or is primarily
merely a surname;
(f) Except as expressly excluded in paragraphs (a), (b), (c) and (d) of
this section nothing herein shall prevent the registration of a mark or trade-name
used by the applicant which has become distinctive of the applicants goods,
business or services. The Director may accept as prima facie evidence that the
mark or trade-name has become distinctive, as applied to or used in connection

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with the applicants goods, business or services, proof of substantially exclusive
and continuous use thereof as a mark or trade-name by the applicant in connection
with the sale of goods, business or services for five years next preceding the date
of the filing of the application for its registration. This has been superseded by
Section 123 of RA 8293.

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37. Section 20, RA 166. This provision states: Certificate of registration prima facie
evidence of validity. A certificate of registration of a mark or trade-name shall
be prima facie evidence of the validity of the registration, the registrants
ownership of the mark or trade-name, and of the registrants exclusive right to use
the same in connection with the goods, business or services specified in the
certificate, subject to any conditions and limitations stated therein. This has been
superseded by Section 138 of RA 8293. Neither RA 166 nor RA 8293 provides
when the presumption of validity and ownership becomes indubitable. In contrast,
under the Lanham Act, as amended, (15 United States Code 1065), such takes
place once the trademark has become incontestable i.e. after the mark owner
files affidavits stating that the mark is registered and has been in continuous use
for five consecutive years; that there is no pending proceeding; and that there has
been no adverse decision concerning the registrants ownership or right to
registration (See Luis Vuitton Malletier and Oakley, Inc. v. Veit, 211 F.Supp.2d
556 [2002]). However, both RA 166 (Section 12) and RA 8293 (Section 145)
require the filing of the affidavit attesting to the continuous use of the mark for
five years and, under Section 145, failure to file such affidavit will result in the
removal of the mark from the Register.

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38. Rollo, pp. 525527.

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39. Societe Des Produits Nestl, S.A. v. Court of Appeals, G.R. No. 112012, 4 April
2001, 356 SCRA 207; McKee Baking Co. v. Interstate Brands Corporation, 738 F.
Supp. 1272 (1990).

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40. Societe Des Produits Nestl, S.A. v. Court of Appeals, supra note 39; Miller
Brewing Co. v. Heileman Brewing Co., 561 F.2d 75 (1977).

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41 (Popup - Popup)
41. Miller Brewing Co. v. Heileman Brewing Co., supra note 40.

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42. A. J. Canfield Co. v. Honickman, 808 F.2d 291 (1986).

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43. Societe Des Produits Nestl, S.A. v. Court of Appeals, supra note 39 citing
43(A) of the Lanham Act, as amended.

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44. Bernard v. Commerce Drug Co., 964 F.2d 1338 (1992).

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45. Keebler Co. v. Rovira Biscuit Corp., 624 F.2d 366 (1980).

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46. McKee Baking Co. v. Interstate Brands Corporation, supra note 39.

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47. See A. Miller and M. Davis, Intellectual Property, Patents, Trademarks and
Copyright in a Nutshell 177178 (1983).

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48. See Lorenzana v. Macagba, No. L-33773, 22 October 1987, 154 SCRA 723; La
Chemise Lacoste, S.A. v. Hon. Fernandez, etc., et al. 214 Phil. 332 (1984). RA
8293 no longer provides for a Supplemental Register and instead mandates a
single registry system (Section 137). Under Section 239, marks registered in the
Supplemental Register under RA 166 will remain in force but are no longer
subject to renewal.

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49. 137 Phil. 838 (1969).

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50. Enacted on 6 March 1903.

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51. Section 3 of Act No. 666 provides: The ownership or possession of a trade-mark,
heretofore or hereafter appropriated, as in the foregoing section provided, shall be
recognized and protected in the same manner and to the same extent, as are other
property rights known to the law. To this end any person entitled to the exclusive
use of a trade-mark to designate the origin or ownership of goods he has made or
deals in may recover damages in a civil action from any person who has sold
goods of a similar kind, bearing such trade-mark, and the measure of the damages
suffered, at the option of the complaining party, shall be either the reasonable
profit which the complaining party would have made had the defendant not sold
the goods with the trade-mark aforesaid, or the profit which the defendant actually
made out of the sale of the goods with the trade-mark, and in cases where actual
intent to mislead the public or to defraud the owner of the trade-mark shall be
shown, in the discretion of the court, the damages may be doubled. The
complaining party, upon proper showing, may have a preliminary injunction,
restraining the defendant temporarily from use of the trade-mark pending the
hearing, to be granted or dissolved in the manner provided in the Code of Civil
Procedure, and such injunction upon final hearing, if the complainants property
in the trade-mark and the defendants violation thereof shall be fully established,
shall be made perpetual, and this injunction shall be part of the judgment for
damages to be rendered in the same cause as above provided. (Emphasis
supplied)

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52. The United States Congress had introduced the same amendment to the Lanham
Act in 1946. In 1962, the US Congress again amended Section 16 of the Lanham
Act (Sec. 43(A)) by deleting the phrase the source or origin of such goods or
services, or identity of such business in the definition of trademark infringement.
This led courts in that jurisdiction to hold that post-sale confusion by the public at
large (Esercizio v. Roberts, 944 F.2d 1235 [1991]. See also Koppers Company,
Inc. v. Krup-Koppers, 517 F.Supp. 836 [1981]) or subliminal confusion, defined
as confusion on a subliminal or subconscious level, causing the consumer to
identify the properties and reputation of one product with those of another,
although he can identify the particular manufacturer of each, (Ortho
Pharmaceutical Corporation v. American Cyanamid Company, 361 F.Supp. 1032
[1973]. See also Farberware, Inc. v. Mr. Coffee, Inc., 740 F.Supp. 291 (1990);
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Dreyfus Fund Incorporated v. Royal Bank of Canada, 525 F. Supp. 1108 [1981])
are sufficient to sustain a trademark infringement claim. Section 155 substantially
reproduces Sec. 43(A).

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53. Agpalo, The Law on Trademark, Infringement and Unfair Competition 4546
(2000).

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54. Records, p. 5.

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55. Ibid., pp. 4, 67.

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56. Sta. Ana v. Maliwat, et al., 133 Phil. 1006 (1968).

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57. Societe Des Produits Nestl, S.A. v. Court of Appeals, supra note 39; Emerald
Garment Manufacturing Corporation v. Court of Appeals, G.R. No. 100098, 29
December 1995, 251 SCRA 600.

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58. V. Amador, Trademarks Under The Intellectual Property Code 260 (1999).

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59. Ibid., p. 263.

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60. 95 Phil. 1 (1954).

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61 (Popup - Popup)
61. 100 Phil. 214 (1956).

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62. No. L-23035, 31 July 1975, 65 SCRA 575.

63 (Popup - Popup)
63. No. L-27906, 8 January 1987, 147 SCRA 154.

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64. Supra note 27.

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65. Supra note 39.

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66. 125 Phil. 295 (1966).

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67. Rollo, pp. 588589.

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68. Time v. Life Television Co. of St. Paul, 123 F. Supp. 470 (1954);

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69. Conde Nast Publications v. Vogue School of Fashion Modelling, 105 F. Supp.
325 (1952); Hanson v. Triangle Publications, 163 F.2d 74 (1947).

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70. See Fisons Horticulture, Inc. v. Vigoro Industries, Inc., 30 F.3d 466 (1994).
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71 (Popup - Popup)
71. No. L-26557, 18 February 1970, 31 SCRA 544.

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72. PACCAR Inc. v. Tele Scan Technologies, L.L.C., 319 F.3d 243 (2003).

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73. Reiterated in Section 168 of RA 8293.

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74. V. Amador, supra note 58 at 278.

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75. Shell Co. of the Philippines, Ltd. v. Ins. Petroleum Refining Co., Ltd., 120 Phil.
434 (1964); La Insular v. Jao Oge, 42 Phil. 366 (1921).

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76. Alhambra Cigar, etc., Co. v. Mojica, 27 Phil. 266 (1914).

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77. Co Tiong Sa v. Director of Patents, supra note 60; Clarke v. Manila Candy Co., 36
Phil. 100 (1917).

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78. See Q-Tips, Inc. v. Johnson & Johnson, 108 F.Supp 845 (1952).

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79. Rollo, pp. 4045.

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80 (Popup - Popup)
80. Suncoast Tours, Inc. v. Lambert Groups, Inc. 1999 WL 1034683 (1999).

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81. Rollo, pp. 148149.

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82. See Q-Tips, Inc. v. Johnson & Johnson, supra note 78.

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83. This provision reads: Actions, and damages and injunction for infringement.
Any person entitled to the exclusive use of a registered mark or trade-name may
recover damages in a civil action from any person who infringes his rights, and the
measure of the damages suffered shall be either the reasonable profit which the
complaining party would have made, had the defendant not infringed his said
rights, or the profit which the defendant actually made out of the infringement, or
in the event such measure of damages cannot be readily ascertained with
reasonable certainty, then the court may award as damages a reasonable
percentage based upon the amount of gross sales of the defendant of the value of
the services in connection with which the mark or trade-name was used in the
infringement of the rights of the complaining party. In cases where actual intent to
mislead the public or to defraud the complaining party shall be shown, in the
discretion of the court, the damages may be doubled.
The complaining party, upon proper showing, may also be granted
injunction.

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84. TSN, (Francis Dy), 15 March 1993, p. 32; TSN (Francis Dy), 22 March 1993, pp.
12.

85 (Popup - Popup)
85. Article 2229, Civil Code.

86 (Popup - Popup)
86. Article 2208(1), Civil Code.
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